Apartment prices keep growing throughout Germany

Among Germany’s major cities, Berlin leads the list of highest growing real estate prices with a yoy-price increase of 15,6% between Q4/2016 and Q4/2017. The German capital is followed by Frankfurt am Main with a 12,5% increase within the same period, as well as Hamburg (11,4%), Stuttgart (11,3%) and Cologne (10,8%). On the nation-wide average, buyers of residential real estate faced a 7% increase in pricing at the end of 2017, as compared to the previous year. Such is the result of a research conducted by the association of “German Pfandbrief Banks” (vdp).

According to an article by the German Frankfurter Allgemeine Zeitung, the real estate boom of the last few years has led to a problematic disproportion between selling prices and rents. In the past, apartments whose purchasing price was higher than 20 annual rents accumulated, were considered as expensive, whereas today purchasing prices as high as 30 annual rents are common. Sadly, this tendency can be observed also in smaller German cities, and only few communities in Eastern Germany seem to be exempt from this development.

Will the market continue growing?

Of course. It goes without saying, that every cycle of growth is going to end, or rather stop temporarily, before resuming to grow (given that the right conditions still exist). However, structural factors play an important role and no short-term prediction about their complex interaction can be made, which is why analysts and observers warn of the possible formation of a real estate bubble in Germany but are unable to predict its beginning, its consequences and its end. Frequent readers of German publications are confronted with alarmist and cautions articles since the beginning of the ongoing real estate cycle – all while prices kept growing and continue to do so.

As of today, many people continue to choose real estate as their favourite investment asset, as European interest rates are down, cheap loans are available everywhere and the overall employment situation in Germany officially seems to be great. According to the German Central Bank, the overall growth of German real estate prices has slowed down a little, due to a slight decrease in demand in rural areas. Major cities, however, keep growing rapidly. As of today, especially looking to cities such as Berlin, Munich and Hamburg, one can expect the real estate market and prices to continue growing.